Thursday March 21, 2019

Finances

Walmart's Online Sales Surge

Walmart Inc. (WMT) released its quarterly and full-year earnings report on Tuesday, February 19. The world's largest retailer's shares jumped more than 4% due to strong eCommerce growth.

Walmart reported quarterly revenue of $138.8 billion. This is up from last year's fourth quarter revenue of $136.3 billion and better than the $138.7 billion that Wall Street predicted. For the full year, the company reported revenue of $514.5 billion.

"We're excited about the work we're doing to reach customers in a more digitally-connected way," said Walmart President and CEO Doug McMillon. "Our commitment to the customer is clear – we'll be there when, where and how they want to shop and deliver new, convenient experiences that are uniquely Walmart."

The company announced earnings of $3.69 billion for the quarter, which is up from earnings of $2.18 billion one year ago. On an adjusted earnings per share basis, the company reported earnings of $1.27 per share, which was more than the $0.73 per share that analysts predicted.

Same-store sales in the fourth quarter were up 4.2%, exceeding the 3.2% increase analysts expected. The company's eCommerce sales were up 43% in the quarter. For the full year, eCommerce sales grew 40%, in line with Walmart's goal. Online sales benefitted from expanded grocery pickup and delivery in the quarter.

Walmart Inc. (WMT) shares ended the week at $99.55, down 2.8% for the week.

Cheesecake Factory Serves Earnings

The Cheesecake Factory, Incorporated (CAKE) released its latest quarterly and full-year earnings report on Wednesday, February 20. Despite the company missing revenue expectations for the quarter, it declared a cash dividend.

The restaurant chain reported $585.15 million in revenue for the second quarter, up from $571.81 million during the same time last year. This missed the $599 million in revenue that analysts expected. Full year revenue was $2.33 billion.

Cheesecake Factory reported quarterly net income of $16.18 million, or $0.36 per share. This was down from earnings of $57.74 million, or $1.26 per share, reported at this time last year.

The Calabasas, California-based company opened three restaurants in the fourth quarter and met its goal of opening five restaurants in the fiscal year. The company posted a 1.9% increase in comparable restaurant sales during the fourth quarter, exceeding analysts' expectations of 1.1% growth in comparable sales. Cheesecake Factory declared a quarterly dividend of $0.33 per share, payable on March 19, 2019.

The Cheesecake Factory, Incorporated (CAKE) shares ended the week at $47.53, relatively unchanged for the week.

CVS Reports Mixed Earnings

CVS Health Corporation (CVS) released its latest quarterly and full-year earnings on Wednesday, February 20. The drug store company reported an increase in revenue but posted a net loss for the quarter.

The company reported revenue of $54.42 billion. This is up 12% from $48.39 billion last year but fell short of analysts' expectation of $54.58 billion. Revenue for the full year was $194.58 billion.

"2018 was a milestone year for CVS Health as we successfully completed our transformational merger with Aetna, began effective implementation of our integration strategy and took important steps toward building the integrated healthcare model that will bring substantial value to our various stakeholders," said CVS President and CEO Larry Merlo. "We had strong financial performance and delivered on our operating expectations."

The company reported a net loss for the quarter of $419 million, down from net income of $3.29 billion at this time last year. On an adjusted earnings per share basis, the company earned $2.14 per share, exceeding Wall Street's expectation of $2.05 per share.

CVS completed its merger with health insurer Aetna during the fourth quarter. Revenue for the quarter grew 12% due to the addition of Aetna and increased prescription volumes in its retail sales segment. CVS attributed the net loss in the quarter to impairment of goodwill and financing costs related to its Aetna acquisition.

CVS Health Corporation (CVS) shares ended the week at $61.95, down 11.8% for the week.

The Dow started the week of 2/19 at 25,850 and closed at 26,032 on 2/22. The S&P 500 started the week at 2,769 and closed at 2,793. The NASDAQ started the week at 7,451 and closed at 7,528.

Treasury Yields Dip as Trade Talks Continue

Yields on U.S. Treasury bonds retreated Friday due to uncertainty stemming from the drafting of U.S. and China trade memorandums. Yields rose late in the week in response to Wednesday's release of the minutes from the most recent Federal Open Market Committee (FOMC) meeting.

On Wednesday, the U.S and China started the process of drafting memorandums of understanding to outline proposed trade reforms. On Friday, Treasury bond yields dipped due to investor anxiety regarding the March 1 trade deal deadline swiftly approaching. However, President Trump has signaled that extensions may be granted, if satisfactory progress toward an agreement is made.

"There's obviously an incentive for both sides to reach a deal," said James Athey, senior investment manager at Aberdeen Standard Investments. "The problem is that you're now getting to the more difficult part of the negotiation, which is things like the [intellectual property] problem."

During early trading on Friday, the benchmark 10-year Treasury note yield was trading at 2.682%. The yield on the 30-year Treasury bond was at 3.037%.

On Wednesday, the Federal Open Market Committee (FOMC) released the minutes from its January 29-30 meeting. The minutes indicated that the Fed is uncertain regarding further interest rate hikes in 2019 and would be patient regarding money policy tightening.

"Many participants suggested that it was not yet clear what adjustments to the target range for the federal funds rate may be appropriate later this year," the minutes stated. "Several of these participants argued that rate increases might prove necessary only if inflation outcomes were higher than in their baseline outlook."

The 10-year Treasury note yield closed at 2.66%, while the 30-year Treasury bond yield was 3.02%.

Mortgage Rates Continue Decline

The 30-year fixed rate mortgage averaged 4.35% this week. This represents a slight decrease from last week when it averaged 4.37%. Last year at this time, the 30-year fixed rate mortgage averaged 4.40%.

This week, the 15-year fixed rate mortgage averaged 3.78%, down from last week's average of 3.81%. The 15-year fixed rate mortgage averaged 3.85% one year ago.

"Mortgage rates fell for the third consecutive week, continuing the general downward trend that began late last year," said Sam Khater, Chief Economist at Freddie Mac. "Wages are growing on par with home prices for the first time in years, and with more inventory available, spring home sales should help the market begin to recover from the malaise of the last few months."

Based on published national averages, the money market account finished the week of 2/19 at 1.31%. The 1-year CD finished at 2.75%.